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Sunday, October 13, 2019

SoftBank to buy wework

SoftBank has prepared a financing package that would give it control of WeWork and further sideline its founder Adam Neumann in exchange for relieving the shared-office startup’s looming cash crunch, according to people familiar with the matter.

WeWork is racing to find a way to shore up its financing after its New York parent company We Co. pulled its plans for an initial public offering and Mr. Neumann resigned as chief executive under pressure.

One potential solution is the SoftBank package. Another possibility: The board has tapped JPMorgan Chase & Co. to look at ways for the company to raise billions in debt, and the bank is in the middle of meetings with investors about participating in a multibillion-dollar debt deal, people familiar with the company’s plans said.

“WeWork has retained a major Wall Street financial institution to arrange a financing,” a company spokesman said. “Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”

SoftBank, which already owns one-third of WeWork, is aiming to invest several billion dollars in new equity and debt, some of the people familiar with the matter said.

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Should there be a deal with SoftBank, much of Mr. Neumann’s voting power—already diminished from its peak but still substantial—would shift to the Japanese conglomerate, which would take a bigger role in turning around We’s operations, people familiar with the matter said.

The situation remains fluid and there is no guarantee a deal with SoftBank, a bank-debt agreement—or some combination of the two—will be reached.

Bleeding cash and shunned by mainstream investors, once-highflying WeWork has become the poster child for startup excess and has called into question the Silicon Valley practice of overlooking financial losses and unorthodox management styles in hopes of future riches.

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WeWork’s Risky Business Model, Explained

The We Co.’s IPO is now postponed after the company announced it would withdraw its request to go public. Here’s a look at the company’s business model and why some investors were eyeing the risk. (Originally published Aug. 29)

We, valued at $47 billion in a SoftBank investment early this year, had been preparing to go public before investors balked at the company’s ballooning losses and atypical financial entanglements with Mr. Neumann, who co-founded WeWork in 2010. Its expected valuation plummeted to below $20 billion, Mr. Neumann resigned under pressure and the listing was scrapped, casting uncertainty over the future of the company, the largest commercial tenant in many cities.

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